City of Fresno Retirement · PDF fileCity of Fresno Retirement Systems March 25, 2014 ... Eugene Fama, PhD, ... Co-Chief Executive Officer,

City of Fresno Retirement Systems

March 25, 2014

Joseph H. Chi, CFA, Co-Head of Portfolio Management and Vice President

Ted Simpson, CFA, Vice President

This information is provided for institutional investors and registered investment advisors, and is not intended for public use. Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission. Consider the investment objectives, risks, and charges and expenses of the Dimensional funds carefully before investing. For this and other information about the Dimensional funds, please read the prospectus carefully before investing. Prospectuses are available by calling Dimensional Fund Advisors collect at (512) 306-7400 or at www.dimensional.com. Dimensional funds are distributed by DFA Securities LLC.

#17625-1011

pattiel

Text Box

Agenda Item: 3:00 pm Joint Meeting of the Retirement Boards Meeting Date: 3/25/2014

Agenda 1. Dimensional

2. Investment Philosophy

3. Emerging Markets Value Portfolio

4. Emerging Markets Large Cap

Value Index

5. Summary

6. Appendix

Dimensional

Dimensional Fund Advisors Putting financial science to work for clients

3

#17624-1011

We use information in market prices throughout our investment process to seek to build solutions with higher expected returns.

We add value by identifying relevant dimensions of expected returns and continually balancing the tradeoffs among competing premiums, diversification, and costs.

We work with clients to understand their long-term needs and to add to their success.

Dimensional Fund Advisors LP founded in 1981. Global AUM and number of employees as of December 31, 2013.

Locations with offices operated by Dimensional. “Dimensional” refers to the Dimensional entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., DFA

Australia Limited, Dimensional Fund Advisors Canada ULC, Dimensional Fund Advisors Pte. Ltd., and Dimensional Japan Ltd.

Global Investment Team, One Dynamic Process

4

Vancouver

Santa Monica Austin

London Amsterdam

Berlin

Singapore

Sydney

Tokyo

Investment Personnel

Client Service

748 employees globally

$338B in global AUM

Founded in 1981

Don’t forget to

change the

effective date

Toronto

As of December 31, 2013.

Leading Financial Economists and Researchers

5

Academics on Dimensional’s Board of Directors

Eugene Fama, PhD, Nobel laureate University of Chicago

Kenneth French, PhD Dartmouth College

Academics on Dimensional’s Mutual Funds Board of Directors

George Constantinides, PhD University of Chicago

John Gould, PhD University of Chicago

Edward Lazear, PhD Stanford University

Roger Ibbotson, PhD Yale University

Myron Scholes, PhD, Nobel laureate Stanford University

Abbie Smith, PhD University of Chicago

Academics Providing Ongoing Consulting Services to Dimensional

Robert Merton, PhD, Nobel laureate Massachusetts Institute of Technology

Sunil Wahal, PhD Arizona State University

Leaders of Dimensional’s

Internal Research Staff

Eduardo Repetto, PhD, Director,

Co-Chief Executive Officer,

and Chief Investment Officer

Gerard O’Reilly, PhD, Head of Research

James Davis, PhD, Vice President

Marlena Lee, PhD, Vice President

Savina Rizova, PhD, Vice President

Stanley Black, PhD

Wes Crill, PhD

Tu Nguyen, CFA, PhD

Massi De Santis, PhD

Vito Sciaraffia, PhD

Dave Twardowski, PhD

Yusun Samuel Wang, PhD

#22675-0312

Don’t forget to

change the

effective date

As of December 31, 2013.

1. Investment Committee Member.

Experienced Teams Ensure Consistency

6

#22675-0312

Don’t forget to

change the

effective date

Eduardo Repetto,1 Director, Co-Chief Executive Officer, and Chief Investment Officer

David Booth,1 Chairman and Co-Chief Executive Officer

Stephen Clark,1 Head of Global Institutional Services and Senior Portfolio Manager

Gerard O’Reilly,1 Head of Research

Global Portfolio Management

Equity Portfolio Management Trading

Joseph Chi,1 Co-Head of Portfolio Management

Jed Fogdall,1 Co-Head of Portfolio Management

Robert Deere,1 Investment Director and Senior Portfolio Manager

Graham Lennon, Head of International Portfolio Management and Senior Portfolio Manager

Arthur Barlow, Managing Director and Senior Portfolio Manager

Akbar Ali, Senior Portfolio Manager

Grady Smith, Senior Portfolio Manager

Karen Umland,1 Senior Portfolio Manager

Stephen Garth, Portfolio Manager

Portfolio Managers: Marcus Axthelm, Murray Cockerell, Paul Foley, Jason Ha, Kotaro Hama, Iwona Hill, Stephen Hughes, David Kershner, Arun Keswani, Nathan Lacaze, John Law, Robert Ness, Daniel Ong, Allen Pu, Stephen Quance, Ted Randall, Joel Schneider, Bhanu Singh, Lukas Smart, Adam Ward, Brian Walsh, Craig Wright

Investment Associates: Joshua Clifford, Emily Cornell, Damian Dormer, Mitchell Firestein, Krati Gokharu, Edward Grace, Joe Hohn, Mary Phillips, Slava Platkov, David Quinn, Sunil Suri, Jim Whittington, Alex Yaftali

Henry Gray,1 Head of Global Equity Trading

John Romiza, Head of International Equity Trading

Jason Lapping, Head of Asia Pacific Trading

Global Equity Trading

Senior Traders: Mark Butterworth, Christian Gunther, Carl Snyder, Ryan Wiley, Sam Willis

Traders: Matthew Fuentes, William Letheren, Richard Mar, Erhan Oktay, Chris Rink, James Simpson, Jonathan Smith, Le Tran, Scott Van Pelt, David Vrolyk

Fixed Income Trading

David LaRusso, Senior Trader

Kipp Cummins, Trader

Claudette Higdon, Trader

Fixed Income Portfolio Management

David Plecha,1 Global Head of Fixed Income

Joseph Kolerich,1 Senior Portfolio Manager

Portfolio Managers: Alexander Fridman, Didier Haenecour, Alan Hutchison, Damien Koch, Travis Meldau, Pamela Noble, Gillian Wilson

Investment Associates: Yan Luo, David Shao, Polly Weiss

#17624-1011

“Dimensional” refers to the Dimensional entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., DFA Australia Limited, Dimensional Fund Advisors Canada

ULC, Dimensional Fund Advisors Pte. Ltd., and Dimensional Japan Ltd.

All assets in US dollars. Numbers may not total 100% due to rounding.

Dimensional Global Investment Solutions $338 billion in global AUM as of December 31, 2013

7

Other $12.0

Real Estate $7.5

Commodities $0.8

Global Balanced $3.7

(in billions)

US $103.2

All Cap Core $29.0

All Cap Value $4.7

Growth $0.4

Large Cap $5.6

Large Cap Value $16.6

SMID Cap Value $10.4

Small Cap $14.4

Small Cap Value $16.4

Micro Cap $5.7

Fixed Income $69.8

US Taxable $39.7

US Tax-Exempt $2.8

Non-US & Global $24.7

Inflation-Protected $2.6

Global Equity $20.4

All Cap/Large Cap $11.2

Value $7.1

Small/SMID Cap $2.1

Developed ex-US $72.6

All Cap Core $16.0

All Cap Value $6.1

Growth $0.1

Large Cap $6.6

Large Cap Value $17.0

Small Cap $13.4

Small Cap Value $13.3

Emerging Markets $59.6

All Cap Core $17.6

Value $30.4

Large Cap $7.3

Small Cap $4.3

Global Balanced 1.1% Global

Equity 6%

REITs & Commodities 2.5%

Developed ex-US Equities 21.5%

US Equities 30.6%

Emerging Markets 17.6%

Fixed Income 20.7%

Investment Philosophy

1. Relative Price refers to the share price (or market cap) of a firm’s stock, divided by a fundamental variable of the firm (e.g., earnings, cash earnings, dividends, net assets). One of the most widely used measures of relative price is the

price/book ratio.

Dimensions of Expected Returns Expected returns are driven by prices investors pay and cash flows they expect to receive

To be considered a

dimension of expected return,

a premium must be:

• Sensible

• Persistent across time periods

• Pervasive across markets

• Robust to alternative

specifications

• Cost-effective to capture in

well-diversified portfolios

Company Size Small cap premium – small vs large companies

Market Equity premium – stocks vs bonds

Relative Price1 Value premium – value vs growth companies

Expected Profitability Profitability premium – high vs low profitability companies

#30605-0113

9

1

Annualized compound returns (%) in US dollars.

Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future

results. Index returns are not representative of actual portfolios and do not reflect costs and fees associated with an actual investment. Actual returns may be lower. See “Index Descriptions” in the

appendix for descriptions of Dimensional and Fama/French index data. The S&P data are provided by Standard & Poor’s Index Services Group. MSCI data copyright MSCI 2013, all rights reserved.

Dimensions of Expected Returns Illustrative index performance

10

#17867-1011

Original Pervasive Slide

Non-US Developed Markets Stocks

Emerging Markets Stocks

US Large Capitalization Stocks

US Small Capitalization Stocks

1975–2012 1927–2012 1927–2012 1989–2012

High

Relative Price

Small

Low

Relative Price

10.69 9.82 11.54 11.71

MSCI World ex US Index S&P 500 Index CRSP 6-10 Index MSCI Emerging Markets Index

1992–2012 1975–2012 1975–2012 1996–2012

Low

Profitability

High

Profitability

5.79 11.66 15.19 7.70

MSCI World ex US Index S&P 500 Index CRSP 6-10 Index MSCI Emerging Markets Index

14.79 13.44

Dimensional International Small Cap Index

Fama/French Emerging Markets Small Cap Index

14.85 11.64 14.77 15.95

Fama/French International Value Index

Fama/French US Large Value Research Index

Fama/French US Small Value Research Index

Fama/French Emerging Markets Value Index

8.79 9.25 8.69 10.31

Fama/French International Growth Index

Fama/French US Large Growth Research Index

Fama/French US Small Growth Research Index

Fama/French Emerging Markets Growth Index

2.81 10.58 8.66 4.31

Dimensional International Low Profitability Index

Dimensional US Large Low Profitability Index

Dimensional US Small Low Profitability Index

Dimensional Emerging Markets Low Profitability Index

8.93 14.44 18.59 11.15 Dimensional International

High Profitability Index Dimensional US Large High Profitability Index

Dimensional US Small High Profitability Index

Dimensional Emerging Markets High Profitability Index

Benchmark

Benchmark

Animated

Emerging Markets Market Premium: Fama/French Emerging Markets Index minus One-Month US Treasury Bills. Emerging Markets Value premium: Fama/French Emerging Markets Value Index minus Fama/French Emerging Markets Growth

Index. Emerging Markets Size Premium: Fama/French Emerging Markets Small Cap Index minus Fama/French Emerging Markets Index. Emerging Markets returns are simulated by Fama/French from IFC and Bloomberg data and are free-

float weighted. In US dollars. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is no guarantee of future results.

5-Year Moving Average of Premiums Emerging markets

11

#17867-1011

-10%

0%

10%

20%

30%

40%

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

14.24%

MARKET PREMIUM

VALUE PREMIUM

SIZE PREMIUM

Re

turn

Pre

miu

m

-10%

0%

10%

20%

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

7.06%

Re

turn

Pre

miu

m

-10%

0%

10%

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

2.29%

Re

turn

Pre

miu

m

---Annual Average Within 2% of Average

Emerging Markets Value Portfolio

Countries and names as of December 31, 2013. Holdings are subject to change.

Emerging Markets Value Portfolio Using an integrated approach to add value across all aspects of the investment process

13

• Structured based on systematic

expected premiums:

– Market

– Relative price (value)

– Expected profitability

– Company size

• Offers broad sector and

security diversification

• Balances competing premiums

and controls implementation

costs by using a disciplined and

patient trading strategy

#17868-1011

17867-1011

Dynamic Investment Process An integrated approach to adding value

14

Original Dynamic Slide

• The Market

Use information in prices and

fundamental data to pursue

higher expected returns.

• Portfolio Structure

Identify the dimensions

of expected returns and

consider the interactions

among premiums,

diversification, and costs.

• Implementation

Maintain strategy focus

while balancing tradeoffs

among competing premiums

and use a flexible process to

help control costs.

Country Weight Targets As of December 31, 2013

15

Dimensional’s capped free-float

adjusted market cap targets:

• Maintain limits on single-

country exposure.

• Mitigate single-country risk.

An event in one country can

have a negative impact on

the whole portfolio.

• Provide broad country

diversification.

EMERGING MARKETS VALUE PORTFOLIO

#17625-1011

Dimensional Targets

(buys capped at 15.0%)

China 15.0%

Taiwan 15.0%

South Korea 15.0%

Brazil 9.8%

South Africa 8.2%

India 6.8%

Mexico 6.3%

Russia 6.0%

Malaysia 4.3%

Indonesia 2.6%

Thailand 2.5%

Poland 2.1%

Turkey 1.8%

Chile 1.5%

Philippines 1.1%

Colombia 0.9%

Greece 0.6%

Hungary 0.3%

Czech Republic 0.2%

For illustrative purposes only.

1. Profitability is measured as operating income before depreciation and amortization minus interest expense scaled by book.

Holdings are subject to change. MSCI data copyright MSCI 2014, all rights reserved.

Portfolio Construction: Security Selection and Weighting Emerging Markets Value Portfolio as of December 31, 2013

16

#17869-1011

• Focus on deep value securities

• In large caps, increased

emphasis on higher expected

return securities:

– Lower relative price, higher

expected profitability, lower

market cap

• In small caps, exclude companies

with lowest expected returns:

– Low expected profitability and

high relative price

Weighted Average

Market Cap (millions)

Aggregate

Price-to-Book

Weighted Direct

Profitability-to-Book

Emerging Markets Value Portfolio $25,356 0.89 0.17

MSCI Emerging Markets Index $45,464 1.48 0.29

SIZ

E

LA

RG

E

RELATIVE PRICE

LOW

SM

ALL

HIGH

LOW

RELATIVE PRICE

SIZ

E

MID

M

EG

A

EXPECTED PROFITABIL ITY 1

LOW

LOWEST

Stocks

below 15%

market cap

limit

HIGH

Stocks with

Lowest 33%

of P/B ratios

RELATIVE PRICE

LOWEST LOW

EX

PE

CT

ED

P

RO

FIT

AB

ILIT

Y1

LO

W

HIG

H

Note: These rules seek to exclude from purchase securities Dimensional determines to fall within these categories.

Portfolio Construction: Seeking to Improve Expected Returns Refining the universe

17

#21234-0112

Asset Class Exclusions

• REITs

• Investment funds

• Highly regulated utilities

Pricing Exclusions

• Recent IPO

• Share classes with foreign

restrictions or with

significant premiums

• Extreme financial distress

or bankruptcy

• Merger or target of

acquisition

Trading Exclusions

• Exchange history

• Insufficient liquidity

• Limited operating history

• Insufficient float

• Listing requirements

Charts for illustrative purposes only.

Managing Momentum We incorporate momentum when making buy and sell decisions

18

Stock returns may exhibit

momentum:

• Stocks with large relative

underperformance tend

to have negative excess

returns in the next period.

• Stocks with large relative

outperformance tend to

have positive excess returns

in the next period.

#17600-1011

PAST FUTURE PAST FUTURE TODAY TODAY

RE

LA

TIV

E R

ET

UR

N

Delay buys of securities otherwise eligible for purchase.

Delay sells of securities otherwise eligible for sale.

NEGATIVE MOMENTUM POSITIVE MOMENTUM

Trading Costs Matter Our approach helps minimize the total costs of trading

19

#17600-1011

Commissions, custody fees, exchange fees

Bid/ask spread, market impact

We deal with explicit costs

by keeping commissions

as low as possible without

sacrificing overall execution.

Trading Costs = + Implicit Costs Explicit Costs

Implicit costs can be

hidden—and potentially

large. We apply a trading

philosophy that emphasizes

patience and flexibility.

Low turnover by

design keeps overall

trading costs down.

Source: Dimensional. Chart data based on all equity agency trades, globally.

Dimensional’s Progressive Approach to Trading Trading utilizes technology and internal resources to maximize opportunities and control costs

20

• Our trading and portfolio

management desks are placed

strategically to cover

the global equity markets.

• Traders use direct market

access (DMA) when available

to maintain full control

of trading process and

reduce commissions.

PERCENTAGE OF DIMENSIONAL’S GLOBAL TRADE VALUE BY BROKER TYPE

#17600-1011

Quarterly: January 2006–March 2013

0%

50%

100%

2006 2007 2008 2009 2010 2011 2012 2013

High Touch Low Touch Direct Market Access

Integrated Portfolio Implementation Efficiently balancing expected premiums with the costs of turnover on a daily basis

21

• We continuously evaluate

the portfolio:

– Buy/sell decisions consider

expected daily premiums

versus transactions costs.

– Spread trading over time to

minimize market impact.

• Our process is built to focus on

higher expected returns every

day while considering costs.

#17600-1011

Past performance is no guarantee of future results. The performance returns calculated for the Dimensional strategies already reflect trading costs.

bps (basis point) One hundredth of a percentage point (0.01%). ITG ALPHA CAPTURE is a service mark of the Investment Technology Group, Inc. companies.

1. Percent of peer universe Dimensional outperforms in terms of trading costs.

2. US trading included in results only for portfolios with global mandates. The information on this slide was provided by Investment Technology Group solely for Dimensional and not for any other third party. These materials are highly confidential and are not to be copied, displayed, or transmitted in any form

without prior written permission from Investment Technology Group.

Dimensional’s Value Added through Trading Third-party trade cost analysis results across all segments of the market

22

#17600-1011

One Year Ending September 30, 2013

Strategy Median Peer Dimensional Dimensional Rank1

US Large Cap Trading -27 bps +20 bps 100%

US Small Cap Trading -61 bps +60 bps 100%

All Developed Markets Trading2 -47 bps +55 bps 100%

All Emerging Markets Trading -62 bps +72 bps 100%

Trading Costs (gain/loss)

ITG POST-TRADE ANALYTICSTM

ALPHA CAPTURESM

1. Operating income before depreciation and amortization minus interest expense scaled by book.


Characteristics As of December 31, 2013

23

#17595-1011

EMERGING MARKETS

VALUE PORTFOLIO

MSCI Emerging

Markets Index

MARKET CHARACTERISTICS

Total Value of Eligible Universe (millions) $1,419,374 $3,795,148

Number of Holdings 2,195 823

SIZE CHARACTERISTICS

Wtd. Average Market Cap (millions) $25,356 $45,464

Median Market Cap (millions) $350 $5,379

VALUATION CHARACTERISTICS

Aggregate Price-to-Book 0.89 1.48

Wtd. Average Dividend-to-Price 2.47% 2.26%

PROFITABILITY CHARACTERISTICS

Weighted Direct Profitability-to-Book1 0.17 0.29

Numbers may not total 100% due to rounding. Sectors defined by MSCI. MSCI data copyright MSCI 2014, all rights reserved. The REITs industry, a member of the Financials sector, is shown separately to illustrate its exclusion from

certain funds.

Sector Allocations As of December 31, 2013

24

#17600-1011

EMERGING MARKETS

VALUE PORTFOLIO

MSCI Emerging

Markets Index

PORTFOLIO WEIGHTS (%)

Financials 33.9 26.3

Energy 15.9 11.3

Materials 15.5 9.7

Industrials 12.0 6.5

Information Technology 7.5 16.0

Consumer Discretionary 6.4 8.9

Consumer Staples 5.1 8.6

Utilities 1.9 3.4

Telecommunication Services 1.3 7.4

Health Care 0.4 1.7

REITs 0.1 0.4

Other 0.0 —

Holdings are subject to change. Numbers may not total 100% due to rounding. MSCI data copyright MSCI 2014, all rights reserved.

Country Allocations As of December 31, 2013

25

#17624-1011

EMERGING MARKETS

VALUE PORTFOLIO

MSCI Emerging

Markets Index

South Korea 16.3 16.1

Taiwan 15.8 11.7

China 15.5 19.8

Brazil 9.8 10.7

Mexico 7.3 5.4

South Africa 7.1 7.4

India 7.1 6.3

Russia 5.0 6.1

Malaysia 3.9 3.8

Thailand 2.9 2.2

Turkey 2.2 1.5

Indonesia 2.2 2.2

Poland 1.7 1.7

Chile 1.5 1.6

Philippines 1.0 0.9

Hungary 0.5 0.3

Colombia 0.2 1.0

Czech Republic 0.2 0.2

Greece 0.1 0.5

Egypt — 0.2

Peru — 0.4

PORTFOLIO WEIGHTS (%) REGIONAL SNAPSHOT

Latin America

Africa

Asia Pacific

Emerging Markets Value Portfolio

MSCI Emerging Markets Index

Europe

7.1% 7.6%

9.6% 10.3%

18.8% 19.1%

64.5% 63.0%

Calendar Year

Returns (%)

EMERGING MARKETS

VALUE PORTFOLIO

MSCI Emerging Markets

Index (net dividends)

2004 39.53 25.55

2005 30.81 34.00

2006 37.93 32.17

2007 45.64 39.39

2008 -53.94 -53.33

2009 92.28 78.51

2010 22.06 18.88

2011 -25.62 -18.42

2012 19.36 18.22

2013 -3.80 -2.60

Performance data shown represents past performance and is no guarantee of future results. Current performance may be higher or lower than the performance shown. The

investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. To obtain

the most current month-end performance data, visit www.dimensional.com. 1. Returns for periods shorter than one year are not annualized. Portfolio inception returns are from the first full month.

MSCI data copyright MSCI 2014, all rights reserved. Indices are not available for direct investment. See “Appendix: Standardized Performance Data & Disclosures” to learn how to obtain complete information on performance, investment

objectives, risks, advisory fees, and expenses of Dimensional’s funds.

Performance As of December 31, 2013

26

#17595-1011

Annualized Returns1 (%) 1 Year 3 Years 5 Years 10 Years

Since 5/98

Portfolio

Inception

EMERGING MARKETS VALUE PORTFOLIO -3.80 -5.12 14.92 12.97 12.50

MSCI Emerging Markets Index (net dividends) -2.60 -2.06 14.79 11.17 —

MSCI Emerging Markets Index (gross dividends) -2.27 -1.74 15.15 11.52 8.33

4TH QUARTER 2013

Value Neutral Growth

Large 2.02% 0.72% 5.78%

Mid 1.40% 1.01% 3.53%

Small 0.73% 0.30% 1.68%

Large cap is defined as approximately the largest 70% of total US market capitalization; Mid cap is approximately the next 20%; and Small cap is approximately the bottom 10%. Growth is defined as approximately the bottom 25% of

securities based on book-to-market; neutral is approximately the next 50%; and value is approximately the highest 25% of securities based on book-to-market.

MSCI data copyright MSCI 2014, all rights reserved. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio.

Emerging Markets Environment MSCI Emerging Markets IMI Index (net dividends)

27

1 YEAR AS OF DECEMBER 31, 2013

Value Neutral Growth

Large -0.76% -6.30% 11.10%

Mid -4.83% -5.05% -2.75%

Small -1.53% -1.23% 6.52%

1. Actual fees as of October 31, 2013.

Fees

28

#17868-1011

Net Expense Ratio1

Total (Gross) Expense Ratio1

Management Fee

Emerging Markets Value Portfolio 0.57 0.57 0.50

Emerging Markets Large Cap Value

Index

Countries and names as of December 31, 2013. Holdings are subject to change.

Emerging Markets Large Cap Value Index Using an integrated approach to add value across all aspects of the investment process

• Structured based on systematic

expected premiums:

– Market

– Relative price (value)

– Expected profitability

– Company size

• Offers broad sector and

security diversification

• Balances competing premiums

and controls implementation

costs by using a disciplined and

patient trading strategy

#17868-1011

Portfolio box .AI file is in staging area, with 4Q 2013 EM boxes

30

Country Weight Targets As of December 31, 2013

Dimensional’s capped free-float

adjusted market cap targets:

• Maintain limits on single-

country exposure.

• Mitigate single-country risk.

An event in one country can

have a negative impact on

the whole portfolio.

• Provide broad country

diversification.

EMERGING MARKETS LARGE CAP VALUE INDEX

#17625-1011

Dimensional Targets

(buys capped at 15.0%)

China 15.0%

South Korea 15.0%

Taiwan 15.0%

Brazil 9.1%

India 7.9%

South Africa 7.3%

Mexico 7.2%

Russia 5.6%

Malaysia 5.2%

Poland 2.4%

Indonesia 2.3%

Thailand 1.9%

Chile 1.5%

Colombia 1.3%

Turkey 1.1%

Philippines 1.0%

Hungary 0.9%

Greece 0.3%

31

For illustrative purposes only.

1. Profitability is measured as operating income before depreciation and amortization minus interest expense scaled by book.


Portfolio Construction: Security Selection and Weighting Emerging Markets Large Cap Value Index as of December 31, 2013

#17869-1011

• Focus on deep value securities

• In large caps, increased

emphasis on higher expected

return securities:

– Lower relative price, higher

expected profitability, lower

market cap

• In small caps, exclude companies

with lowest expected returns:

– Low expected profitability and

high relative price

Weighted Average

Market Cap (millions)

Aggregate

Price-to-Book

Weighted Direct

Profitability-to-Book

DFA Emerging Markets Large Cap Value Index $38,113 1.02 0.22

MSCI Emerging Markets Index $45,464 1.48 0.29

SIZ

E

LA

RG

E

RELATIVE PRICE

LOW

SM

ALL

HIGH

LOW

RELATIVE PRICE

SIZ

E

MID

M

EG

A

EXPECTED PROFITABIL ITY 1

LOW

LOWEST

Stocks

below 15%

market cap

limit

HIGH

32

1. Operating income before depreciation and amortization minus interest expense scaled by book.


Characteristics Comparison As of December 31, 2013

#17595-1011

EMERGING MARKETS

LARGE CAP VALUE INDEX

MSCI Emerging

Markets Index

MARKET CHARACTERISTICS

Total Value of Eligible Universe (millions) $1,123,529 $3,795,148

Number of Holdings 224 823

SIZE CHARACTERISTICS

Wtd. Average Market Cap (millions) $38,113 $45,464

Median Market Cap (millions) $5,313 $5,379

VALUATION CHARACTERISTICS

Aggregate Price-to-Book 1.02 1.48

Wtd. Average Dividend-to-Price 2.46% 2.26%

PROFITABILITY CHARACTERISTICS

Weighted Direct Profitability-to-Book1 0.22 0.29

33

Numbers may not total 100% due to rounding. Sectors defined by MSCI. MSCI data copyright MSCI 2014, all rights reserved. The REITs industry, a member of the Financials sector, is shown separately to illustrate its exclusion from

certain funds.

Sector Allocations Comparison As of December 31, 2013

#17600-1011

EMERGING MARKETS


MSCI Emerging

Markets Index

PORTFOLIO WEIGHTS (%)

Financials 33.8 26.3

Materials 19.0 9.7

Energy 15.2 11.3

Information Technology 9.3 16.0

Consumer Discretionary 8.6 8.9

Industrials 6.3 6.5

Consumer Staples 4.2 8.6

Utilities 2.8 3.4

Telecommunication Services 0.8 7.4

Health Care 0.0 1.7

REITs 0.0 0.4

34

Holdings are subject to change. Numbers may not total 100% due to rounding. MSCI data copyright MSCI 2014, all rights reserved.

Country Allocations Comparison As of December 31, 2013

#17624-1011

EMERGING MARKETS


MSCI Emerging

Markets Index

China 15.0 19.8

South Korea 15.0 16.1

Taiwan 15.0 11.7

Brazil 9.1 10.7

India 7.9 6.3

South Africa 7.3 7.4

Mexico 7.2 5.4

Russia 5.6 6.1

Malaysia 5.2 3.8

Poland 2.4 1.7

Indonesia 2.3 2.2

Thailand 1.9 2.2

Chile 1.5 1.6

Colombia 1.3 1.0

Turkey 1.1 1.5

Philippines 1.0 0.9

Hungary 0.9 0.3

Greece 0.3 0.5

Czech Republic 0.0 0.2

Egypt 0.0 0.2

Peru 0.0 0.4

PORTFOLIO WEIGHTS (%) REGIONAL SNAPSHOT

Latin America

Africa

Asia Pacific

Emerging Markets Large Cap Value Index

MSCI Emerging Markets Index

Europe

7.3% 7.6%

10.3% 10.3%

19.1% 19.1%

63.3% 63.0%

35

The Emerging Markets Large Cap Value Index monthly returns are computed as the simple average of the monthly returns of four sub-indices, each one reconstituted once a year at the end of each quarter of the year. Filters were applied

to data retroactively and with the benefit of hindsight. Returns are not representative of actual portfolios and do not reflect costs and fees associated with an actual investment. Actual returns may be lower. It is not possible to invest directly

in an index, which is unmanaged. Please see “Appendix” for index description.

MSCI data copyright MSCI 2014, all rights reserved. Indices are not available for direct investment.

Performance Comparison As of December 31, 2013

#17595-1011

Annualized Returns (%) 1 Year 3 Years 5 Years 10 Years

Since 1/94

Large Value

Index Inception

EMERGING MARKETS LARGE CAP VALUE INDEX -3.81 -2.77 17.06 14.24 10.79

MSCI Emerging Markets Index (net dividends) -2.60 -2.06 14.79 11.17 —

MSCI Emerging Markets Index (gross dividends) -2.27 -1.74 15.15 11.52 5.70

Calendar Year

Returns (%)

EMERGING MARKETS LARGE

CAP VALUE INDEX

MSCI Emerging Markets

Index (net dividends)

2004 34.13 25.55

2005 28.10 34.00

2006 35.65 32.17

2007 47.91 39.39

2008 -50.05 -53.33

2009 93.97 78.51

2010 23.28 18.88

2011 -19.55 -18.42

2012 18.80 18.22

2013 -3.81 -2.60

36

Fees Emerging Markets Large Cap Value Separate Account

PROPOSED FEES FOR CITY OF FRESNO RETIREMENT SYSTEMS

Separate Account Fee: 55 bps

Minimum Annual Fee: $175,000

37

Summary

1. Refers to the Dimensional entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., DFA Australia Limited, Dimensional Fund Advisors Canada ULC,

Dimensional Fund Advisors Pte. Ltd., and Dimensional Japan Ltd.

Dimensional Fund Advisors A global investment firm1 with a research-based, transparent, and process-driven approach

39

#17867-1011

An investment philosophy based on sound academic research

An investment process that adds value through portfolio structure

and implementation

Investment solutions that provide access to sources of higher

expected returns

A firmwide commitment to our clients

Thank You!

Appendix

Performance data shown represents past performance. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month end, access our website at www.dimensional.com. Consider the investment objectives, risks, and charges and expenses of the Dimensional funds carefully before investing. For this and other information about the Dimensional funds, please read the prospectus carefully before investing. Prospectuses are available by calling Dimensional Fund Advisors collect at (512) 306–7400 or at www.dimensional.com. Dimensional funds are distributed by DFA Securities LLC. Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.

Standardized Performance Data & Disclosures

42

#28230-0912

Risks include loss of principal and fluctuating value. Investment value will fluctuate, and shares, when redeemed, may be worth more or less than original cost. Small and micro cap securities are subject to greater volatility than those in other asset categories. International and emerging markets investing involves special risks such as currency fluctuation and political instability. Investing in emerging markets may accentuate these risks. Sector-specific investments focus on a specific segment of the market, which can increase investment risks. Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks, including changes in credit quality, liquidity, prepayments, call risk and other factors. Municipal securities are subject to the risks of adverse economic and regulatory changes in their issuing states. Real estate investment risks include changes in real estate values and property taxes, interest rates, cash flow of underlying real estate assets, supply and demand, and the management skill and creditworthiness of the issuer. Sustainability funds use environmental and social screens that may limit investment opportunities for the fund. Commodities include increased risks, such as political, economic, and currency instability, and may not be suitable for all investors. The Portfolio may be more volatile than a diversified fund because the Portfolio invests in a smaller number of issuers and commodity sectors. The fund prospectuses contain more information about investment risks.


2. The net expense ratio applies to the indicated funds and takes into account a contractual management fee waiver and expense reimbursement agreement that currently is scheduled to remain in place through 2/28/2015. Please refer to

the prospectus for more complete information on advisory fees, expense reimbursements, and other expenses.

3. Effective August 1, 2013, the administrative fee payable by the Portfolio to the Advisor decreased from 0.05% to 0.035% of the Portfolio’s average daily net assets on an annualized basis. As a result, the Total Operating Expense Ratio

has been adjusted to reflect the estimated management fee to be paid by the portfolio through 10/31/2014. The Advisor has contractually agreed to reduce the fee waiver expense limit from 0.10% to 0.08% of the Portfolio’s average daily

net assets on an annualized basis.


43

#28230-0912

As of December 31, 2013 Average Annual Total Returns (%) Symbol 1 Year 5 Years 10 Years

Since Inception

Net Expense

Ratio1 (%)

Total (Gross) Expense

Ratio1 (%) Management

Fee Inception

Date

US Equity Portfolios

US Core Equity 1 Portfolio2 DFEOX 36.60 19.87 — 8.11 0.19 0.19 0.17 9/15/2005

US Core Equity 2 Portfolio2 DFQTX 37.76 20.16 — 8.09 0.22 0.22 0.20 9/15/2005

US Vector Equity Portfolio2 DFVEX 40.21 20.81 — 8.21 0.32 0.32 0.30 12/30/2005

US Micro Cap Portfolio DFSCX 45.06 22.78 9.29 12.58 0.52 0.52 0.50 12/23/1981

US Small Cap Portfolio DFSTX 42.21 23.78 10.15 11.20 0.37 0.37 0.35 3/19/1992

US Small Cap Value Portfolio DFSVX 42.38 22.89 10.02 12.90 0.52 0.52 0.50 3/2/1993

US Small Cap Growth Portfolio2 DSCGX 42.73 — — 42.07 0.40 0.50 0.35 12/20/2012

US Targeted Value Portfolio2 DFFVX 43.03 22.14 10.42 13.05 0.37 0.37 0.35 2/23/2000

US Large Cap Value Portfolio DFLVX 40.32 21.02 8.88 10.52 0.27 0.27 0.25 2/19/1993

US Large Cap Growth Portfolio2 DUSLX 33.93 — — 32.53 0.20 0.29 0.17 12/20/2012

US Large Company Portfolio2,3 DFUSX 32.33 17.91 7.42 4.53 0.08 0.09 0.06 9/23/1999

Enhanced US Large Company Portfolio DFELX 32.11 18.66 7.35 8.14 0.24 0.24 0.20 7/2/1996

Non-US Equity Portfolios

International Core Equity Portfolio2 DFIEX 23.43 14.57 — 5.98 0.39 0.39 0.35 9/15/2005

International Vector Equity Portfolio2 DFVQX 24.31 15.53 — 6.44 0.51 0.51 0.45 8/14/2008

International Small Company Portfolio2 DFISX 27.44 17.67 10.31 7.60 0.54 0.54 0.40 9/30/1996

International Small Cap Value Portfolio DISVX 32.39 17.09 10.92 8.28 0.69 0.69 0.65 12/29/1994

International Small Cap Growth Portfolio2 DISMX 27.60 — — 27.31 0.55 1.00 0.50 12/20/2012

International Value Portfolio DFIVX 23.12 12.98 8.05 7.24 0.43 0.43 0.40 2/15/1994

International Large Cap Growth Portfolio2 DILRX 22.99 — — 22.60 0.30 0.65 0.25 12/20/2012

Large Cap International Portfolio DFALX 20.69 12.22 7.03 6.27 0.29 0.29 0.25 7/17/1991

Emerging Markets Core Equity Portfolio2 DFCEX -2.64 16.13 — 10.04 0.63 0.63 0.55 4/5/2005

Emerging Markets Small Cap Portfolio DEMSX -1.38 19.82 13.18 12.96 0.75 0.75 0.65 3/5/1998

Emerging Markets Value Portfolio DFEVX -3.80 14.92 12.97 12.17 0.57 0.57 0.50 4/1/1998

Emerging Markets Portfolio DFEMX -3.12 14.81 11.63 7.73 0.57 0.57 0.50 4/25/1994

World ex US Value Portfolio2 DFWVX 17.02 — — 8.63 0.60 0.76 0.47 8/23/2010

World ex US Targeted Value Portfolio 2 DWUSX 19.91 — — 24.21 0.79 1.27 0.58 11/1/2012

World ex US Core Equity Portfolio2 DFWIX — — — 11.04 0.47 0.97 0.40 4/9/2013

Global Portfolios

Global Allocation 25/75 Portfolio2

DGTSX 5.85 7.22 4.91 4.94 0.27 0.44 0.20 12/24/2003

Global Allocation 60/40 Portfolio2

DGSIX 15.97 12.86 6.82 6.92 0.29 0.52 0.25 12/24/2003

Global Equity Portfolio2

DGEIX 29.15 17.82 8.51 8.68 0.31 0.61 0.30 12/24/2003

Selectively Hedged Global Equity Portfolio2 DSHGX 24.69 — — 19.50 0.40 0.72 0.30 11/14/2011




3. Assumed highest marginal tax rate in effect for capital gains and ordinary income. Income from funds managed for tax efficiency may be subject to an alternative minimum tax and/or any applicable state and local taxes.


44

#28230-0912


Since Inception

Net Expense

Ratio1 (%)



Fee Inception

Date

Tax Managed Portfolios3

Tax-Managed US Small Cap Portfolio DFTSX 43.37 21.76 9.01 10.27 0.52 0.52 0.50 12/15/1998

After Taxes on Distributions 42.98 21.56 8.73 10.05

After Taxes on Distributions and Sale of Fund Shares 24.53 17.85 7.39 8.76

Tax-Managed US Targeted Value Portfolio DTMVX 43.86 22.23 9.29 11.20 0.44 0.44 0.42 12/11/1998



Tax-Managed US Equity Portfolio2 DTMEX 34.17 17.95 7.69 7.50 0.22 0.22 0.20 9/25/2001



Tax-Managed US Marketwide Value Portfolio DTMMX 40.31 21.51 9.24 7.47 0.37 0.37 0.35 12/14/1998



Tax-Managed International Value Portfolio DTMIX 22.65 12.53 8.19 6.94 0.53 0.53 0.50 4/16/1999



TA US Core Equity 2 Portfolio2,3 DFTCX 37.55 20.02 — 6.62 0.24 0.24 0.22 10/4/2007

After Taxes on Distributions 36.69 19.58 — 6.25

After Taxes on Distributions and Sale of Fund Shares 21.44 16.30 — 5.17

TA World ex US Core Equity Portfolio2,3 DFTWX 16.61 14.66 — 3.06 0.46 0.46 0.40 3/6/2008

After Taxes on Distributions 15.33 14.18 — 2.63

After Taxes on Distributions and Sale of Fund Shares 9.40 11.88 — 2.43

Real Estate Portfolios Real Estate Securities Portfolio2 DFREX 1.39 16.44 8.22 9.79 0.18 0.19 0.17 1/5/1993

International Real Estate Securities Portfolio2 DFITX 2.27 15.29 — -1.84 0.39 0.39 0.35 3/1/2007

Global Real Estate Securities Portfolio2 DFGEX 1.77 15.95 — 3.02 0.32 0.55 0.27 6/4/2008

Social and Sustainability Portfolios

US Sustainability Core 1 Portfolio2 DFSIX 36.69 19.90 — 9.83 0.33 0.33 0.29 3/12/2008

International Sustainability Core 1 Portfolio2 DFSPX 22.64 13.38 — 2.56 0.52 0.50 0.42 3/12/2008

US Social Core Equity 2 Portfolio2 DFUEX 37.08 20.02 — 5.81 0.30 0.30 0.25 10/1/2007

International Social Core Equity Portfolio2 DSCLX 22.35 — — 24.35 0.60 0.68 0.37 11/1/2012

Emerging Markets Social Core Equity Portfolio2 DFESX -3.15 15.80 — 7.03 0.66 0.66 0.55 8/31/2006





45

#28230-0912


Since Inception

Net Expense

Ratio1 (%)



Fee Inception

Date

Fixed Income Portfolios

One-Year Fixed Income Portfolio DFIHX 0.34 0.99 2.20 5.16 0.17 0.17 0.15 7/25/1983

Two-Year Global Fixed Income Portfolio DFGFX 0.46 1.22 2.24 3.64 0.18 0.18 0.15 2/9/1996

Short-Term Government Portfolio2

DFFGX -0.45 2.08 3.15 5.57 0.19 0.19 0.17 6/1/1987

Five-Year Global Fixed Income Portfolio DFGBX -0.41 3.66 3.60 5.81 0.28 0.28 0.25 11/6/1990

Intermediate Government Fixed Income Portfolio DFIGX -3.52 3.05 4.67 6.72 0.12 0.12 0.10 10/19/1990

Inflation-Protected Securities Portfolio2

DIPSX -9.27 5.77 — 5.25 0.12 0.12 0.10 9/18/2006

Short-Term Municipal Bond Portfolio2

DFSMX 0.46 1.66 2.00 2.06 0.22 0.23 0.20 8/20/2002

Intermediate-Term Municipal Bond Portfolio2

DFTIX -2.05 — — -0.51 0.23 0.27 0.20 3/1/2012

California Short-Term Municipal Bond Portfolio2

DFCMX 0.65 1.87 — 2.22 0.23 0.24 0.20 4/2/2007

California Intermediate-Term Municipal Bond Portfolio2

DCIBX -0.73 — — 1.73 0.23 0.26 0.20 11/29/2011

Selectively Hedged Global Fixed Income Portfolio2

DFSHX -1.11 3.71 — 1.51 0.18 0.18 0.15 1/9/2008

World ex US Government Fixed Income Portfolio2

DWFIX -2.16 — — 2.57 0.20 0.23 0.18 12/6/2011

Short-Term Extended Quality Portfolio2

DFEQX 0.41 — — 4.09 0.22 0.23 0.20 3/4/2009

Intermediate-Term Extended Quality Portfolio2

DFTEX -3.81 — — 3.73 0.22 0.23 0.20 7/20/2010

Investment Grade Portfolio2

DFAPX -2.87 — — 3.70 0.22 0.41 0.20 3/7/2011

Commodities Portfolio

Commodity Strategy Portfolio2 DCMSX -9.09 — — -5.14 0.34 0.34 0.30 11/9/2010

Index Descriptions

46

Dimensional US Small Low Profitability Index was created by Dimensional in

January 2013 and represents an index consisting of US small cap companies. It is

compiled by Dimensional. Small is defined as the bottom 10% of the US total

market capitalization. Within small cap companies, Dimensional sorts stocks into

three profitability groups from high to low. Each group represents one-third of the

market cap of small caps. The index represents the returns of the low-profitability

group. It is rebalanced once per year.

Dimensional US Small High Profitability Index was created by Dimensional

in January 2013 and represents an index consisting of US small cap companies.

It is compiled by Dimensional. Small is defined as the bottom 10% of the

US total market capitalization. Within small cap companies, Dimensional sorts stocks

into three profitability groups from high to low. Each group represents one-third of

the market cap of small caps. The index represents the returns of the high-

profitability group. It is rebalanced once per year.

Dimensional US Large Low Profitability Index was created by Dimensional in

January 2013 and represents an index consisting of US large cap companies. It is

compiled by Dimensional. Large is defined as the top 90% of the US total market

capitalization. Within large cap companies, Dimensional sorts stocks into three

profitability groups from high to low. Each group represents one-third of the market

cap of large caps. The index represents the returns of the low-profitability group. It

is rebalanced once per year.

Dimensional US Large High Profitability Index was created by Dimensional in

January 2013 and represents an index consisting of US large cap companies. It is

compiled by Dimensional. Large is defined as the top 90% of the US total market

capitalization. Within large cap companies, Dimensional sorts stocks into three

profitability groups from high to low. Each group represents one-third of the market

cap of large caps. The index represents the returns of the high-profitability group. It

is rebalanced once per year.

Dimensional International Small Cap Index was created in 2004 and is compiled by

Dimensional. The bottom 10% of market capitalization is included from each

Country. Countries are market cap weighted subject to a 50% cap. Before 1970, the

index is 50% UK and 50% Japan.

Dimensional International Low Profitability Index was created by Dimensional in

January 2013 and represents an index consisting of non-US Developed companies.

It is compiled by Dimensional. Dimensional sorts stocks into three profitability

groups from high to low (each representing one-third of the market capitalization).

The index represents the returns of the low-profitability group. The index is

rebalanced twice per year.

Dimensional International High Profitability Index was created by Dimensional in

January 2013 and represents an index consisting of non-US Developed companies.

It is compiled by Dimensional. Dimensional sorts stocks into three profitability

groups from high to low (each representing one-third of the market capitalization).

The index represents the returns of the high-profitability group. The index is


Dimensional Emerging Markets Low Profitability Index was created by

Dimensional in April 2013 and represents an index consisting of emerging markets

companies and is compiled by Dimensional. Dimensional sorts stocks into three

profitability groups from high to low (each representing one-third of the market

capitalization). The index represents the returns of the low profitability group. It is


Dimensional Emerging Markets High Profitability Index was created by

Dimensional in April 2013 and represents an index consisting of emerging markets

companies and is compiled by Dimensional. Dimensional sorts stocks into three

profitability groups from high to low (each representing one-third of the market

capitalization). The index represents the returns of the high profitability group. It is


The Dimensional Indices have been retrospectively calculated by Dimensional Fund Advisors LP and did not exist prior to their index inceptions dates. Accordingly, the results shown during the periods prior to each Index’s index inception

date do not represent actual returns of the Index. Other periods selected may have different results, including losses. Backtested index performance is hypothetical and is provided for informational purposes only to indicate historical

performance had the index been calculated over the relevant time periods. Backtested performance results assume the reinvestment of dividends and capital gains.

Methodology used for computing profitability premiums: Dimensional controls for relative price (BtM) and size (market cap) when computing the annualized compound returns for high and low profitability stocks in US and non-US

developed markets and controls only for relative price in emerging markets. Profitability is measured as operating income before depreciation and amortization minus interest expense, scaled by book. Dimensional Index Data compiled by

Dimensional from CRSP, Compustat, and Bloomberg.

The results shown during the periods prior to each Index’s index inception date do not represent actual returns of the Index. Other periods selected may have different results, including losses. Backtested index performance is hypothetical

and is provided for informational purposes only to indicate historical performance had the index been calculated over the relevant time periods. Backtested performance results assume the reinvestment of dividends and capital gains.

Index Descriptions

47

Fama/French US Large Growth Research Index: Provided by Fama/French from

CRSP securities data. Includes the upper-half range in market cap and the lower

30% in book-to-market of NYSE securities (plus NYSE Amex equivalents since July

1962 and Nasdaq equivalents since 1973).

Fama/French US Large Value Research Index: Provided by Fama/French from

CRSP securities data. Includes the upper-half range in market cap and the upper



Fama/French US Small Growth Research Index: Provided by Fama/French from

CRSP securities data. Includes the lower-half range in market cap and the lower 30%

in book-to-market of NYSE securities (plus NYSE Amex equivalents since July 1962

and Nasdaq equivalents since 1973).

Fama/French US Small Value Research Index: Provided by Fama/French from

CRSP securities data. Includes the lower-half range in market cap and the upper



Fama/French International Growth Index: 2008–present: Provided by Fama/French

from Bloomberg securities data. Simulated strategy of MSCI EAFE countries in the

lower 30% book-to-market range. 1975–2007: Provided by Fama/French from MSCI

securities data.

Fama/French International Value Index: 2008–present: Provided by Fama/French

from Bloomberg securities data. Simulated strategy of MSCI EAFE countries in the

upper 30% book-to-market range. 1975–2007: Provided by Fama/French from MSCI

securities data.

Fama/French Emerging Markets Growth Index : 2009–present: Provided by

Fama/French from Bloomberg securities data. Simulated strategy using IFC

investable universe countries. Companies in the lower 30% book-to-market range;

companies weighted by float-adjusted market cap; countries weighted by country

float-adjusted market cap; rebalanced monthly. 1989–2008: Provided by

Fama/French from IFC securities data. IFC data provided by International

Finance Corporation.

Fama/French Emerging Markets Value Index: 2009–present: Provided by


investable universe countries. Companies in the upper 30% book-to-market range;

companies weighted by float-adjusted market cap; countries weighted by country

float-adjusted market cap; rebalanced monthly. 1989–2008: Provided by



Fama/French Emerging Markets Small Cap Index: 2009–present: Provided by


investable universe countries. Companies in the bottom 30% of aggregate market

cap; companies weighted by float-adjusted market cap; countries weighted by

country float-adjusted market cap; rebalanced monthly. 1989–2008: Provided by



Index Description

January 1994–Present: Dimensional Emerging Markets Large

Value Index Composition: Consists of large cap companies

whose relative price is in the bottom 30% of their country’s

large companies after the exclusion of utilities and companies

with either negative or missing relative price data. The

index emphasizes companies with smaller capitalization, lower

relative price, and higher profitability. The index also excludes

those companies with the lowest profitability and highest

relative price within their country’s large value

universe. Profitability is measured as operating income before

depreciation and amortization minus interest expense scaled by

book. The index monthly returns are computed as the simple

average of the monthly returns of four sub-indices, each one

reconstituted once a year at the end of each quarter of the

year. Countries currently included are Brazil, Chile, China,

Colombia, Czech Republic, Greece, Hungary, India, Indonesia,

Malaysia, Mexico, Philippines, Poland, Russia, South Africa,

South Korea, Taiwan, Thailand, Turkey. Exclusions: REITs and

Investment Companies Source: Bloomberg

The Dimensional Emerging Markets Large Value Index has

been retrospectively calculated by Dimensional Fund Advisors

and did not exist prior to April 2008. Accordingly, the results

shown during the periods prior to April 2008 do not represent

actual returns of the Index. Backtested index performance is

hypothetical and is provided for informational purposes only to

indicate historical performance had the index been calculated

over the relevant time periods. Backtested performance results

assume the reinvestment of dividends and capital gains. The

Index is unmanaged and is not subject to fees and expenses

typically associated with managed accounts or investment

funds. Investments cannot be made directly in an index. Past

performance is no guarantee of future results.

The calculation methodology for the Dimensional Emerging

Markets Large Value Index was amended in January 2014 to

include direct profitability as a factor in selecting securities for

inclusion in the index.

The indices are rebalanced semiannually and backtested performance results assume reinvestment of dividends and capital gains. Filters were applied to data retroactively and with the benefit of hindsight. Returns are not representative of

actual portfolios and do not reflect costs and fees associated with an actual investment. Actual returns may be lower. It is not possible to invest directly in an index, which is unmanaged.

#34855-0813

48

Emerging Markets Market Premium: Fama/French Emerging Markets Index minus One-Month US Treasury Bills. Emerging Markets Value premium: Fama/French Emerging Markets Value Index minus Fama/French Emerging Markets Growth

Index. Emerging Markets Size Premium: Fama/French Emerging Markets Small Cap Index minus Fama/French Emerging Markets Index. Emerging Markets returns are simulated by Fama/French from IFC and Bloomberg data and are free-

float weighted. In US dollars. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is no guarantee of future results.

Yearly Observations of Premiums Emerging markets

49

#17867-1011

MARKET PREMIUM

VALUE PREMIUM

SIZE PREMIUM

7.06%

-20%

0%

20%

40%

60%

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Re

turn

Pre

miu

m

-20%

0%

20%

40%

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

2.29%

Re

turn

Pre

miu

m

-60%-40%

-20%

0%20%

40%60%

80%

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

14.24%

Re

turn

Pre

miu

m

---Average Within 2% of Average

Emerging Markets Strategies

Concentration Risk

• Highly diversified across countries

• Country diversification leads to diversification across multiple currencies

• Countries generally capped at 15% at point of purchase

• Sector target weights typically capped at their approximate weight in a broadly diversified, sector-neutral universe plus an additional 10%

• Industry groups generally capped at 25%

• Guidelines target a maximum 5% per issue at time of purchase

Implementation Risk

• Team managed

• Approved exchanges only; ongoing evaluation of listing requirements, liquidity, and settlement mechanism

Operational Risk

• Charles River customized Order Management System

• Comprehensive pre- and post-trade compliance

• Independent accountant, custodian bank, and auditors

• Independent mid-office in charge of trade processing

• Independent SSAE 16 audit performed annually

• Firm and subsidiary regulators include SEC, FINRA, FSA, ASIC, BCSC, MSC, BaFin, and OSC

Style Risk

• Monitor characteristics of individual securities and overall strategy to prevent style drift

Dimensional’s Investment Committee is responsible for creating investment guidelines specific to each portfolio. The Investment Committee considers the investment objectives and limitations set forth in each portfolio’s governing

agreements when addressing risk, and investment guidelines may be distinct between Dimensional-managed portfolios.

Summary of Portfolio Risk Management Provides diversification and broad oversight with minimal style drift

50

#17867-1011

Presenters’ Biographies

51

Joseph H. Chi, CFA Co-Head of Portfolio Management and Vice President

Joseph Chi is co-head of Portfolio Management, chairman of the Investment Committee, and a member of the

Investment Policy Committee at Dimensional. Together with Jed Fogdall, Joe oversees Dimensional's global

portfolio management team, including US equity, non-US equity, and fixed income strategies. He is involved in the

design and marketing of new products and strategies, speaking frequently to current and prospective clients on

many investment-related topics. Joe joined Dimensional in 2005 as a portfolio manager on the international equity

team. Previously a securities and finance attorney, Joe specialized in venture capital, public offerings, and mergers

and acquisitions.

Joe earned his MBA from the Anderson School of Management at the University of California, Los Angeles, in 2005

with a concentration in finance. He is a CFA Charterholder who also holds a JD from the University of Southern

California and a BS in electrical engineering from UCLA.

Ted Simpson, CFA Vice President

Ted Simpson, a vice president on the Institutional Services team, is responsible for developing and maintaining

relationships with public pension funds, foundations, endowments, Taft-Hartley plan sponsors, and corporate

pension and defined contribution plans.

Since joining Dimensional in 2002, Ted has held a number of positions within the firm. He began as a marketing

consultant before taking a leadership role in the firm's defined contribution market initiative. Later, Ted got involved

with Dimensional's consultant relations effort and eventually helped manage the group. Most recently, he has shifted

his attention to working directly with clients.

Prior to joining Dimensional, Ted worked for Salomon Brothers, Legal & General, Mattel, Lion Nathan, and a fee-only

RIA. He earned an MBA in marketing, strategy, and organizational behavior from the Kellogg School of Management

at Northwestern University, and a BA in politics and economics from Princeton University. Ted is a CFA

Charterholder and holds FINRA licenses 7 and 63.

Documents

City of Fresno Retirement · PDF fileCity of Fresno Retirement Systems March 25, 2014 ... Eugene Fama, PhD, ... Co-Chief Executive Officer,